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How Fossil Fuel Divestment Will Hurt Fossil Fuel Stock Prices

[fa icon="calendar'] Jan 21, 2015 9:33:25 AM / by Carol Pierson Holding

By: Carol Pierson Holding

If anyone needed more proof that economics trumps sustainability: low gas prices are causing a plunge in electric vehicle and hybrid sales.

Ban Fracking Tax Carbon

The same phenomenon is happening in the divestment movement. Moral outrage pushed 83 churches, universities and non-profits to divest $50 billion before the September climate march. This is a blip for an industry valued at $5 trillion, whose top investor Blackrock owns $146 billion in fossil fuel investments and where a single company Exxon Mobil is valued at $425 billion, and Shell and Chevron at $268 billion and $248 billion respectively.

These numbers are staggering, and the pace of the divestment movement in relative monetary terms is glacial, despite its many moral and symbolic victories. Even if as Bloomberg’s New Energy Finance says this divestment movement has more rapid growth and quicker scaling than any of its predecessors, does it have a chance of affecting fossil fuel company behavior?

Only when it starts to affect the stock price.

Tim Dickinson argues eloquently in this issue of Rolling Stone that divesting has become the smart move for the financially savvy, and not because of divestment pressure. Prompted by the recent 50% drop in the price of oil, now hovering below $45 per barrel —

“From late June to early January, across the world, the 10 oil firms with the largest proven reserves collectively lost roughly 20 percent of their market value.  …Goldman Sachs warned that nearly $1 trillion in planned oil-field investments would be unprofitable – even if oil were to stabilize at $70 per barrel. The industry is already scaling back the hunt for high-cost sources of new oil. Chevron has shelved drilling in the Canadian Arctic, and Hercules Offshore, a significant driller in the Gulf of Mexico, has idled four rigs and laid off more than 300 workers. Plunging profits are also putting the brakes on fracking.”

And that’s only the beginning. Countries around the world are putting limits on carbon emissions, so much so that Governor of the Bank of England Mark Carney warned that "the vast majority of reserves are unburnable." The argument that fossil fuel companies’ reserves will become “stranded assets” has long been a hopeful prediction from activists, but the message has a different tone when it comes from a powerful central banker whose main concern is not sustainability but stability.

Another concerned guardian of the status quo has similar fears. Bevis Longstreth, who served as commissioner of the SEC under Ronald Reagan and later chaired the Finance Committee of the Rockefeller Brothers Foundation, blasts the oil companies: "There is no good reason for this vast expenditure of stockholder wealth. It is wasted capital, an offense against stockholders in terms financial alone."

But my favorite argument for divesting comes from a report generated by Oxford University’s Stranded Assets Programme. The authors bring up the very real reputational risk that a divestment movement creates, which they label “Organisational Stigma,” or “disapproval, even ‘disgust’ at an organisation’s activities, values or behaviour” and tie it directly to stock price: “Even when divestment outflows are small or short term and do not directly affect future cash flows (as is true with fossil fuel divestment), if they trigger a change in market norms that close off channels of previously available money (i.e., the ability to sell stock), then a downward pressure on the stock price of a targeted firm may be large and permanent.”

Add to that the growing perception that the fossil fuel companies’ decisions about where to invest are considered irrational, and you've created a very serious threat to fossil fuel companies' stock price and the managers whose pay and bonuses depends on that price. And that’s the most likely route to real change.

Photo courtesy of Carol Pierson Holding 


Carol Pierson HoldingCarol Pierson Holding writes on environmental issues and social responsibility for policy and news publications, including the Carnegie Council’s Policy Innovations, Harvard Business Review, San Francisco Chronicle, India Time, The Huffington Post and many other web sites. Her articles on corporate social responsibility can be found on CSRHub.com, a website that provides sustainability ratings data on 13,000+ companies worldwide. Carol holds degrees from Smith College and Harvard University.

CSRHub provides access to corporate social responsibility and sustainability ratings and information on 13,000+ companies from 135 industries in 127 countries. By aggregating and normalizing the information from 370 data sources, CSRHub has created a broad, consistent rating system and a searchable database that links millions of rating elements back to their source. Managers, researchers and activists use CSRHub to benchmark company performance, learn how stakeholders evaluate company CSR practices and seek ways to change the world.

 

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[fa icon="comment"] 0 Comments posted in Bevis Longstreth, BlackRock, Bloomberg New Energy Finance, Exxon Mobil, Fossil Fuel Divestment, Shell, Uncategorized, Mark Carney, oil reserves, organisational stigma, Rolling Stone, Tim Dickinson, oil prices, Oxford University Stranded Assets Programme, stranded assets, Carol Pierson Holding, Chevron, Hercules Offshore

Climate Crisis Provides Chance to Make Society Fairer

[fa icon="calendar'] Dec 2, 2014 11:10:49 AM / by Carol Pierson Holding

By Carol Pierson Holding

hurry and buy

The evening after Thanksgiving, I turned on NBC Nightly News with the avuncular Brian Williams, expecting frothy stories about turkey dinners and children’s dreams coming true. Instead, I got a line-up that started with Ray Rice’s exoneration by the NFL, complete with clips of him beating his wife-to-be, then one on shoppers fighting over merchandise at a Black Friday event, followed by protests against Ferguson’s grand jury decision not to prosecute police officer Darren Wilson.

I am struck this holiday season by the seemingly endless stream of news about apparent injustice without recourse. In addition to Ferguson and Ray Rice, there’s the Rolling Stone article “A Rape on Campus: A Brutal Assault and Struggle for Justice at UVA.” This morning, The New York Times Magazine cover story chronicled lack of justice for military rape victims. And then there’s Bill Cosby…

I went to college in 1972, the year that Title IX was passed banning gender discrimination in schools. I watched the tail end of the civil rights demonstrations and celebrated with protestors, especially at the end of the Vietnam War, when the draft was shut down, and with it, the most direct injustice to males in my cohort. In 1970, Earth Day encouraged us to treat our environment with respect if not reverence.

Stories of institutional bias against victims, both codified and cultural, again seem to dominate the news, along with demonstrations against it. I hope this cycle of protest has more complete and lasting solutions. But how can we really and truly put an end to egregious injustice?

Naomi Klein offers one idea. Klein is my hero for introducing me in 1999 to the potential for brands to change the world. At that time, government and religious leaders had lost people’s trust and brands had become the only institutional voices that consumers listened to. In that role, Klein wrote, brands, through social responsibility programs, could lead us out of society’s injustices. The many colors of Benetton would cure racism. Body Shop would end animal testing. Liz Claiborne would create awareness of domestic abuse. The Gap’s Red campaign would raise money for the poor in Africa.

In fact, these campaigns were mostly promotion, doing little to address the issues while succeeding in selling more stuff, and, in so doing, creating even more injustice. An enormous amount of energy is needed to produce, transport and store our stuff. That energy comes mostly from fossil fuels, and those mining it perpetrate injustice around the world. Texaco, now owned by Chevron, created the “Amazon Chernobyl.” Ecuadorian natives have been in court for 11 years so far seeking damages for their society’s complete destruction. The BP spill in the Gulf of Mexico killed 11 workers, sickened local residents, and decimated tens of thousands of birds, turtles and sea life, the most vulnerable of all. Within a single month last spring, Casper Wyoming-based Belle Fourche Pipeline operations suffered three oil spills in Wyoming totaling more than 100,000 gallons, with no fines or penalties. Oil extraction in North Dakota is destroying the land with minimal punishment, with one company, Continental Resources, getting off scot-free until its 11th blow-out.

Still, Klein remains a hero to me for trying. And she has tried again in her latest book, This Changes Everything. In her words, “Climate change is our chance to right those festering wrongs at last—the unfinished business of liberation.”

Klein’s thesis compares the climate crisis to World War II and the massive solution required to rebuild Europe prescribed by the Marshall Plan. In 1947, George Marshall described the aim of his Marshall Plan as a fight “against hunger, poverty, desperation and chaos.” In current dollars, the U.S. invested $160 billion to prevent a European collapse that would have hurt us too. Much as Europe had to rebuild itself then, we have to rebuild ourselves now.

Along the way, we just might cure our addiction to spending and much of the depression and insecurity that goes with it. Why not invest in a new society that’s safer and fairer, that reduces the threats posed by hunger, poverty, desperation and chaos?

As Klein puts it, “Climate change, if treated as a true planetary emergency (could) become a galvanizing force for humanity, leaving us all not just safer from extreme weather, but with societies that are safer and fairer in all kinds of other ways as well.” Regardless of how workable her solutions are, her thesis seems worth considering.
Photo courtesy of Jesus Leon via Flickr CC.

Carol Pierson HoldingCarol Pierson Holding writes on environmental issues and social responsibility for policy and news publications, including the Carnegie Council’s Policy Innovations, Harvard Business Review, San Francisco Chronicle, India Time, The Huffington Post and many other web sites. Her articles on corporate social responsibility can be found on CSRHub.com, a website that provides sustainability ratings data on 10,000+ companies worldwide. Carol holds degrees from Smith College and Harvard University.

CSRHub provides access to corporate social responsibility and sustainability ratings and information on 10,000+ companies from 135 industries in 104 countries. By aggregating and normalizing the information from 365 data sources, CSRHub has created a broad, consistent rating system and a searchable database that links millions of rating elements back to their source. Managers, researchers and activists use CSRHub to benchmark company performance, learn how stakeholders evaluate company CSR practices and seek ways to change the world.

 

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[fa icon="comment"] 0 Comments posted in Benetton, Bill Cosby, Black Friday, corporate social responsibility, Ecuador, Ferguson, UVA Rape, Uncategorized, The Gap, Liz Claiborne, No Logo, Ray Rice, The Body Shop, This Changes Everything, Amazon Chernobyl, BP, Carol Pierson Holding, Chevron, Continental Resources, military rape, Naomi Klein

Assigning Corporate Blame for Global Warming Now Possible

[fa icon="calendar'] Nov 26, 2013 10:08:51 AM / by Carol Pierson Holding

By Carol Pierson Holding

Three recent headlines offer disturbing news to climate advocates. Together, they show climate changecatastrophic aggression from the fossil fuel producers.

First, Huffington Post reported on predictions from the International Energy Agency (IEA) that the U.S. will by bypass both Saudi Arabia and Russia in oil production by 2016 “at the latest,” a year earlier than it predicted in 2012. The U.S. will be world leader in oil production, subsuming climate to energy self-sufficiency.

The second astonishing headline covered the Climate Accountability Institute’s most recent study, as reported by Suzanne Goldenberg for The Guardian: “Just 90 companies caused two-thirds of man-made global warming emissions.” The list is topped by state-owned monopolies in China and Russia, with well over 8% each, and includes 50 fossil fuel investor-owned firms, including such widely recognized brands as Chevron, Exxon, BP, Royal Dutch Shell, British Coal Corp, Peabody Energy and BHP Billiton.

[csrhubwidget company="Chevron-Corp" size="650x100" hash="c9c0f7"]

The list’s top 20 produced nearly 30% of historical emissions. Chevron alone produced 3.5% of total global emissions and Exxon produced 3.2%; the U.K.’s BP and Shell are close behind. We’ve known the primary sources of carbon emissions for some time, but this study quantifies the relative damage each has done. It’s shocking all over again.

The third depressing headline is about the failure of the UN Framework Convention on Climate Change which just concluded two weeks of meetings in Warsaw on Friday. As the New York Times reported, talks stalled because the developed countries refused to pay the $100 billion they’d promised to underdeveloped countries, which suffer the worst of climate change impacts.

But it’s not just developed countries that are responsible for emissions. As Naomi Oreskes, professor of the history of science at Harvard and co-founder of the Climate Accountability Institute, explained in The Guardian article, "There are all kinds of countries that have produced a tremendous amount of historical emissions that we do not normally talk about. We do not normally talk about Mexico or Poland or Venezuela. So then it's not just rich v poor, it is also producers v consumers, and resource rich v resource poor ."

Not surprisingly, the entities most at fault for carbon emissions flaunt their disdain for the U.N.’s process. As evidence, the environmental NGO 350.org cites this fact: “The Polish government not only allowed corporate sponsors for the talks, but co-sponsored a major coal summit during the negotiations. It’s hard to see the U.N. gaining any traction around proposed financial consequences for countries.

But there are consequences for investor-owned companies. We know who those companies are, and now we know how much each is to blame.

Compare the problem of assigning blame and penalties for emissions to the 2008 financial crisis. At first, the task seemed impossible. It was too complex. The problem was systemic. Those who might be at fault were just too powerful. There was no way to parse the blame.

But with the force of public outrage and regulatory will and enough time to unravel specific causes, that’s changing.

Five years later, JP Morgan is the first to be fined, $13 billion for corrupt mortgage practices alone. And while many argue that financial penalties have not hurt the bank, it suspended stock buybacks last year and more could happen again to accommodate growing fines and penalties. And at least one analyst, Oppenheimer’s Charles Peabody, cut the bank’s 2013 earnings estimate by 12.5%.

So far, the only blame fossil fuel companies have suffered has been for oil spills such as Chevron’s currently contested $19 billion fine for polluting in Ecuador. But fossil fuel industry hubris towards global warming is pushing the same combination of public outrage and regulatory will as resulted in financial penalties for powerful banks. And now, thanks to the IEA report, we have the piece that took longest in punishing the banks, a way to quantitatively parse blame.

It’s a long game but it looks like the most recent combination of events —the U.S. becoming the world’s top oil producer, specific emissions numbers making it easier to assign blame, and failure at the U.N. — might just enable a remedy, at least in the U.S., forcing financial penalties on fossil fuel companies that more accurately reflect their true costs.

Picture courtesy of lightsinmotion via Flickr cc.


Carol Pierson HoldingCarol Pierson Holding writes on environmental issues and social responsibility for policy and news publications, including the Carnegie Council's Policy Innovations, Harvard Business Review, San Francisco Chronicle, India Time, The Huffington Post and many other web sites. Her articles on corporate social responsibility can be found on CSRHub.com, a website that provides sustainability ratings data on 8,400+ companies worldwide. Carol holds degrees from Smith College and Harvard University.

CSRHub provides access to corporate social responsibility and sustainability ratings and information on 8,400+ companies from 135 industries in 104 countries. By aggregating and normalizing the information from 290+ data sources, CSRHub has created a broad, consistent rating system and a searchable database that links millions of rating elements back to their source. Managers, researchers and activists use CSRHub to benchmark company performance, learn how stakeholders evaluate company CSR practices and seek ways to change the world.

 

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[fa icon="comment"] 0 Comments posted in BHP Billiton, Climate Accountability Institute, climate change, Exxon, fines, fossil fuel companies, global warming, Huffington Post, International Energy Agency, Polish government, JP Morgan, Naomi Oreskes, Suzanne Goldenberg, Uncategorized, oil production, penalties, Royal Dutch Shell, The Guardian, UN Framework Convention on Climate Change, BP, Carol Pierson Holding, Chevron, global emissions, Peabody energy, stock buyback

CSRHub’s Bahar Gidwani Speaking at the Centre for Sustainability and Excellence

[fa icon="calendar'] Oct 2, 2012 11:13:49 AM / by Bahar Gidwani

CSRHub CEO and Co-founder Bahar Gidwani will be speaking at CSE’s Certified Centre for Sustainability and ExcellenceSustainability (CSR) Practitioner Training on October 11, 2012 in Brussels, Belgium.

CSE is a leading global sustainability (CSR) consulting, coaching, and training firm. CSE is offering a two day Certified Sustainability (CSR) Practitioner Training. This IEMA Approved challenging 2-day course enables participants to acquire the skills and competencies required to become qualified CSR practitioners. Over the past three years, executives from Fortune 500 companies, Local Governments and Universities have participated in CSE’s Global Certified trainings, including Supervalu, Unilever, ABM, Lockheed Martin, Baker Hughes, Noble Energy, United Airlines, Coca Cola, ITW, Stanford University, Walmart and Chevron.

CSE has been approved by IEMA (Institute of Environmental Management and Assessment), a leading not for profit global institute offering certified trainings for CSOs, CSR Managers, Communication Directors, HSE Managers and other executives. At the end of the trainings, professionals have the opportunity to complete a Final Assignment, which allows them to qualify for certification and earn the recognized CSR-P Certification (CSR-P Seal).

CSE is also offering Certified Sustainability (CSR) Practitioner Training at the following locations:

Vancouver, BC, Canada, November 1 - 2.
Atlanta, GA, November 29 - 30.
Chicago, IL, December 4 - 5.

If you haven’t already, register to attend one of CSE’s Certified Sustainability (CSR) Practitioner Trainings today!

The first 10 people to register for a CSE’s training and let us know will receive a 25% discount on a subscription to CSRHub. Contact sales@csrhub.com for the discount link.


Bahar Gidwani is a Cofounder and CEO of CSRHub. Formerly, he was the CEO of New York-based Index Stock Imagery, Inc, from 1991 through its sale in 2006. He has built and run large technology-based businesses and has experience building a multi-million visitor Web site. Bahar holds a CFA, was a partner at Kidder, Peabody & Co., and worked at McKinsey & Co. Bahar has consulted to both large companies such as Citibank, GE, and Acxiom and a number of smaller software and Web-based companies. He has an MBA (Baker Scholar) from Harvard Business School and a BS in Astronomy and Physics (magna cum laude) from Amherst College. Bahar races sailboats, plays competitive bridge, and is based in New York City.

CSRHub provides access to corporate social responsibility and sustainability ratings and information on nearly 5,000 companies from 135 industries in 65 countries. By aggregating and normalizing the information from over 170 data sources, CSRHub has created a broad, consistent rating system and a searchable database that links millions of rating elements back to their source. Managers, researchers and activists use CSRHub to benchmark company performance, learn how stakeholders evaluate company CSR practices and seek ways to change the world.

 

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[fa icon="comment"] 3 Comments posted in ABM, Bahar Gidwani, Baker Hughes, Coca Cola, CSE, Sustainability (CSR) Practitioner Training, Unilever, Noble Energy, Uncategorized, Lockheed Martin, sustainability (CSR) consulting, training firm, ITW, Stanford University, Supervalu, Sustainability coaching, United Airlines, Centre for Sustainability and Excellence, Chevron, WalMart

Greenwashing in the Oil Industry? Say It's Not True . . .

[fa icon="calendar'] Feb 14, 2011 3:31:13 PM / by Carol Pierson Holding

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By Carol Pierson Holding

In the past two weeks, there has been a lot of press about Chevron’s announcement that that it will sell all four of its US coal mines by the end of the year. The company says it is getting out of coal because the technology for converting coal to liquid won’t be available for another 10-15 years, and that even then technology might not be viable, and that the company will focus on “other operations.” In other words, it’s purely a business decision.

Chevron cites concern about its profits, which is a good thing, right? And its profits have been terrific, with 5-year returns over double those of its leading competitors. But what puzzled me is that I could not find a single story that even mentioned how Chevron’s coal mine sale supports its successful pro-environment platform.

After all, Chevron has committed to renewables and spent millions advertising this fact.  And even though Chevron’s business is only 13% renewables now, the company bravely re-branded itself several years ago with the aspirational tag “The Power of Human Energy: Finding Newer, Cleaner Ways to Power the Earth.” And its CSR ratings are among the highest in its industry, according to CSRHub.

So, thinking the media had simply left out the environmental piece, I went to Chevron’s web site to find its official press release about its decision to exit coal. To my surprise, there was none. Nothing at all.  Instead, I found two other remarkable tidbits. First, Chevron reported stunning profits for this quarter of $5.3 billion, an increase of 70% over last year’s Q4. The company credits higher prices for crude, which we knew. We all notice the higher prices at the pump. So how is it investing these profits and those it will make selling coal mines?

The second notable press release was about its $4 billion investment in another deep water drilling project in the Gulf of Mexico. The gist (which I gleaned from Oil and Gas Financial Journal, as this press release had been taken down since the first time I looked) is that Chevron’s unfortunately named Big Foot deep water drilling project, its sixth facility in the Gulf, will be located approximately 225 miles south of New Orleans, Louisiana.

Now I have to admit: I am truly a naif in the oil and gas extraction industry. But this seems a bit like a shell game to me, albeit a sophisticated one.

Rather than toot it’s own horn for getting out of the dirtiest of its businesses, coal, Chevron exits quietly, while in an equally soft voice, the company invests $4 billion in deep water drilling off the coast of New Orleans, site of a deep water oil spill that has been called the largest environmental disaster in US history. In the meantime, Chevron crows to the public not about its exit from coal but about its focus on renewables.

 And this is one of the best of the big oil lot?


Carol Pierson Holding is a writer and an environmentalist; her articles on CSR can be found on her website.

Image courtesy of Flickr user Iguanasan.

 

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[fa icon="comment"] 2 Comments posted in Big Food deep water drilling, corporate social responsibility, CSR, CSRHUB opinion, ESG, New Orleans, Louisiana, sustainability, oil, Carol Pierson Holding, Chevron, coal, coal mine, CSRHub, renewable energy, SRI

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